What This Guide Covers
This guide explains the HECS-HELP compulsory repayment thresholds and rates for the 2025-26 financial year. If you have a HELP, VET Student Loan, Australian Apprenticeship Support Loan, or any other study and training loan, these thresholds determine how much you'll repay through the tax system.
In 2025-26, Australia introduced a major reform: HECS-HELP repayments moved from a flat percentage applied to your total income to a marginal rate system — meaning you only repay on the income above the $67,000 threshold, not your entire income. This is the most significant change to the student loan repayment system since HECS was introduced in 1989.
The Big Change: Marginal Rate System (1 July 2025)
From the 2025-26 income year, compulsory repayments are calculated using marginal rates. Your compulsory repayment is calculated only on the income above the minimum repayment threshold of $67,000. (ATO guidelines)
Under the old system (2024-25 and earlier), if your repayment income crossed a threshold, you paid a set percentage of your entire income. For example, earning $80,000 in 2024-25 triggered a 3.5% repayment on the full $80,000 — that's $2,800.
Under the new system, earning $80,000 in 2025-26 means you pay 15% on only the $13,000 above $67,000 — just $1,950. That's $850 less, or roughly $33 more in each fortnightly pay.
The reform was recommended by the Australian Universities Accord Final Report (February 2024) and passed Parliament as the Universities Accord (Cutting Student Debt by 20 per cent) Bill 2025. Around one million Australians with student debt are expected to benefit.
FY2025-26 Repayment Thresholds and Rates
| Repayment Income | Repayment Amount | Effective Rate |
|---|---|---|
| $0 – $67,000 | Nil | 0% |
| $67,001 – $125,000 | 15c for each $1 over $67,000 | 0–7.0% |
| $125,001 – $179,285 | $8,700 + 17c for each $1 over $125,000 | 7.0–9.2% |
| $179,286 and over | 10% of total repayment income | 10% |
What Counts as Repayment Income?
The ATO defines repayment income as the sum of:
- Taxable income (excluding assessable First Home Super Saver released amounts)
- Total reportable fringe benefits
- Total net investment loss (including net rental losses)
- Reportable super contributions
- Exempt foreign employment income
This means even if your taxable income is below $67,000, you may still owe a repayment if significant fringe benefits or super contributions push your total repayment income over the threshold.
Who Benefits Most?
The marginal rate reform disproportionately helps lower and middle-income earners:
| Income Level | Old System (2024-25) | New System (2025-26) | Annual Saving |
|---|---|---|---|
| $67,000 | $1,005 (1.5%) | $0 | +$1,005 |
| $75,000 | $1,875 (2.5%) | $1,200 (15% × $8,000) | +$675 |
| $80,000 | $2,800 (3.5%) | $1,950 (15% × $13,000) | +$850 |
| $100,000 | $5,000 (5.0%) | $4,950 (15% × $33,000) | +$50 |
| $130,000 | $9,100 (7.0%) | $9,550 ($8,700 + 17% × $5,000) | −$450 |
| $150,000 | $13,500 (9.0%) | $12,950 ($8,700 + 17% × $25,000) | +$550 |
| $180,000 | $18,000 (10.0%) | $18,000 (10% flat) | $0 |
*The old system used 19 progressive brackets (1%–10%). Representative brackets are shown for comparison.*
The biggest winners are those earning between $67,000 and $80,000, who previously paid 1.5–3.5% of their total income and now only pay 15% on the portion above $67,000.
Calculation Examples
Example 1: Income Below $125,000
Christina has:
- Taxable income: $50,420
- Reportable fringe benefits: $4,560
- Net investment loss: $1,250
- Reportable super contributions: $15,000
- Exempt foreign employment income: $2,580
Repayment income = $50,420 + $4,560 + $1,250 + $15,000 + $2,580 = $73,810
Christina falls in the $67,001–$125,000 band.
Repayment = ($73,810 − $67,000) × 15% = $6,810 × 15% = $1,021.50
Example 2: Income Between $125,001 and $179,285
Neil has:
- Taxable income: $113,450
- Reportable super contributions: $13,614
Repayment income = $113,450 + $13,614 = $127,064
Neil falls in the $125,001–$179,285 band.
Repayment = $8,700 + ($127,064 − $125,000) × 17% = $8,700 + $350.88 = $9,050.88
Example 3: Income Above $179,286
Priya has:
- Taxable income: $212,980
- Reportable super contributions: $25,557
Repayment income = $212,980 + $25,557 = $238,537
Priya exceeds the $179,286 threshold.
Repayment = $238,537 × 10% = $23,853.70
All three examples are official ATO worked examples from the Study and training loan repayment thresholds page.
20% Debt Reduction and Indexation Reform
Alongside the marginal rate reform, the Government also delivered:
- 20% one-off HELP debt reduction — applied to all HELP balances before 1 June 2025 indexation
- Indexation cap reform — from 2023-24, annual indexation is capped at the lower of CPI (Consumer Price Index) and WPI (Wage Price Index), replacing the old CPI-only formula. In June 2024, this retroactive cap generated a credit for many loan accounts.
These combined measures mean your outstanding HELP balance may shrink significantly before you start repaying under the new marginal system.
How Repayments Work in Practice
If you're an employee, your employer withholds additional tax through the PAYG system based on the HELP repayment declaration on your Tax File Number Declaration form.
The ATO's Study and training loan repayment calculator will not be updated with the new marginal rates until 1 July 2026. Until then, it may estimate your 2025-26 compulsory repayment incorrectly. Use the Department of Education's estimator instead.
If you've been having too much withheld:
- You'll receive any excess back as a tax refund when you lodge your 2026 tax return
- You can vary your PAYG withholding by lodging a PAYG withholding variation with the ATO
Common Misconceptions
"I don't need to repay if I'm still studying."
False. Compulsory repayments apply once your repayment income exceeds $67,000, regardless of whether you're still enrolled. There is no student exemption from HECS repayments.
"HECS repayments are just another tax."
HECS repayments function like an additional marginal obligation, but they reduce your outstanding loan balance — you're paying down debt, not just paying tax. Once the debt reaches zero, repayments stop.
"I can choose not to repay and let indexation handle it."
False. HECS repayments are compulsory and calculated as part of your tax assessment. You cannot opt out.
"High earners are worse off under the new system."
The ATO confirms there is no change for people earning $179,286 or more — they continue to pay 10% of total repayment income, identical to the old top bracket.
What to Do Next
Quick Checklist
- Confirm your HELP balance after the 20% reduction (myGov)
- Calculate your 2025-26 repayment income (taxable income + fringe benefits + reportable super)
- Determine which marginal tier you fall into
- Estimate your 2025-26 compulsory repayment
- Review your PAYG withholding — has your employer adjusted for the new rates?
- Speak to a registered tax agent about voluntary repayments if you're considering paying off your debt faster
Need Help With Your Tax Return?
Complex situation? a registered tax agent (see the directory) Our partner agents review every detail for accuracy and compliance.
*Disclaimer: This article provides general information only and is not tax advice. HECS-HELP repayment rules depend on your individual circumstances. For personalised advice, consult a registered tax agent or visit ato.gov.au.*